With the unemployment rate on the verge of escalating beyond 10% and the number of unemployment claims surpassing analysts expectations, there remains much uncertainty in the markets for businesses dependent on consumer spending. Essentially, either directly or indirectly, corporations depend on a strong economy and consumers buying their products and services. However, companies that provide unemployment services to individuals have a positive correlation with unemployment figures. The more people looking for work, the more people there are using these services. (Find out how to get more money from your employer. Read Negotiating For Employment Perks.)
IN PICTURES: 10 Insurance Tips For Homeowners

Monster Worldwide (NYSE:MWW), for example, has a business model which is dependent on a certain level of unemployment in the economy. Of course, their services are not limited to the unemployed, but span those seeking to change careers as well. For fiscal 2009, they reported earnings of $905 million, down 29% from the previous years after factoring in exchange rate effects. Monster recently announced the $225 million acquisition of HotJobs, an online recruitment website, indicating their expansion into other segments of the job market. Monster attempts to create a symbiotic relationship between potential employers and hopeful employees. So, although the company requires there to be some unemployment, they also depend on available job openings.

Manpower (NYSE:MAN) and its subsidiaries provides ranging employment services, such as employee selection, recruitment and training. Compared to three months ago when most analysts placed these shares in hold categories, the current consensus is that this Wall Street is recommending that investors purchase this stock - giving it a target price of 20% above its current value. Institutional investors currently hold 95% of Manpower's outstanding shares.

Compared to 2003 and 2004, when China had an unemployment rate of over 10%, the current percentage of active job seekers unable to find work stands below 5%. 51job (Nasdaq:JOBS) is a provider of employment services in China, obtaining most of their revenue from recruitment advertisements and from resume database subscription fees. Compared to Monster, Manpower and Kelly Services (Nasdaq:KELYA) which have respective betas of 2.1, 1.58 and 1.35, 51Jobs shareholders are exposed to significantly less market risk; the company carries a beta of 0.8. These shares are sensitive to overall market conditions because these corporations are also dependent on employers trying to find employees.

The Bottom Line
Investing into these types of companies is somewhat tricky. On one hand, their businesses are set up in such a manner that, if everyone was happily employed, they would be out of business. On the other, despite the partial dependence on unemployment, these service providers can only help clients when employers are actively seeking workers. Following March, 2009, unemployment continues to remain an ongoing problem despite increases in GDP and the overall stock market. This type of environment provides ideal conditions to invest in companies that help people find work. (Learn how to answer some of the hardest interviewer questions and scenarios. Check out Tips To Beat Tough Interviews.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  3. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  4. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  5. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  6. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  7. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  8. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  9. Stock Analysis

    Is Walmart's Rally Sustainable? (WMT)

    Walmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
  10. Stock Analysis

    GoPro's Stock: Can it Fall Much Further? (GPRO)

    As a company that primarily sells discretionary products, GoPro and its potential falls right in line with consumer trends. Is that good or bad?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center